Daily Brief

Retail therapy needed

Shopping boost possible

Every day since the Easter weekend sterling has placed last among the major currencies. After four consecutive daily drubbings it would not be a shock to see the pound making an upward correction today. The reopening of unnecessary shops will remind investors that Britain is doing well in its anti-Covid efforts.

Having said that, the first law of trends is that they are more likely to continue than to reverse. And on Friday the pound was still stuck in a downward trend. The Australian dollar and Norwegian krone also had losing days on Friday, alongside sterling, but both are 1.2% or more ahead on the week against the pound. Sterling is down by an average of 1.6% from Tuesday morning, with no wins.

It was not the UK economic statistics that troubled the pound on Friday. The only one to emerge was the Halifax house price index, and it put the average price at a record high, up by 1.1% on the month and 6.5% on the year. It was the first rise since November and left the average property at £254,606. The Bank of England published its Quarterly Bulletin on Friday. Under the heading “Delivering data standards and transforming data collection in financial services”, it had no impact on sterling.


Canadian jobs

The top performers were the US and Canadian dollars, which rose by an average of 0.2% and strengthened by 0.4% against the pound. The Greenback was helped by the idea that US interest rates will head higher sooner than the Fed would have investors believe. The Loonie got a lift from some punchy employment figures. 

Canada’s March Labour Force Survey was much stronger than analysts had predicted. The economy added 303k jobs, three times the expected number, and unemployment fell from 8.2% to 7.5%, its lowest level since the pandemic made itself felt.

Data from the United States showed producer prices rising 1% in March, putting them 4.2% higher on the year. The annual increase was the biggest since 2011, adding to the suspicion that the Federal Reserve might be tempted to raise interest rates sooner than it has said. Fed Vice Chairman Richard Clarida gave a discrete nod to that theory when he said that “If an expected jump in inflation this year does not reverse going into 2022 the Fed ‘will have to take that into account’ in setting policy”.


Low-key Monday

In a quiet start to the week today’s highlights are euro retail sales and the Bank of Canada’s Business Outlook Survey. Nothing on the agenda is likely to set the FX market alight.

Japan has already reported on producer prices, which were up by 1% on the year, and bank lending, up by 6.3%. Eurozone retail sales are forecast to have risen 1% in February, putting them 5.7% lower than the same month last year.

After lunch Silvana Tenreyro, an external member of the Bank of England’s Monetary Policy Committee, will make an appearance on the Webinarium to talk about economic shocks and trade. Eric Rosengren, the President of the Boston Fed, will be speaking later in the afternoon.


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